Working commentary on navigating China's state capitalism
This is a working piece. My current reading references are: The Governance of China by Xi Jinping, Guns, Germs, and Steel by Jared Diamond, and a refresher on Basic Economics by Thomas Sowell.--------
The recent blanket sell off of Chinese stocks is uncalled for and as such offers opportunities for investors willing to understand China to scoop up decent businesses. In my opinion, to invest in Chinese companies one must understand how the CCP thinks. Instead of a blanket wide punishment of companies, one should place different probabilities of political intervention risks on different industries and companies and value them as such.
The unreasonable punishment probably stems from the fear that the Chinese state cares little to none on the rights of foreign investors. This is not particularly true. The question to ask is: "What are the incentives at play here?" And to answer that question, one should work backwards from the long-term goals of the CCP. Xi Jinping's book titled The Governance of China offers a couple of interesting gems:
(To be continued...)